The US Justice Department conditionally cleared on Thursday the deal between radio broadcaster Cumulus Media, Inc. (CMLS) and its peer peer Citadel Broadcasting Corp. (CDELB.PK), requiring Cumulus to divest three radio stations in two markets.
Cumulus agreed in March to acquire Citadel, which emerged from bankruptcy in June 2010, for $37 per share in cash and shares, valuing Citadel at about $2.4 billion. The completion of the merger was expected by the end of 2011.
DoJ noted that the originally proposed deal would substantially lessened competition for radio advertising in Flint, Michigan, and Harrisburg-Lebanon-Carlisle, Pennsylvania.
"The divestitures required by the consent decree will enable radio advertisers to continue to receive the benefits of competition in Harrisburg and Flint," said Sharis Pozen, Acting Assistant Attorney General in charge of the Department of Justice's Antitrust Division.
The DoJ's antitrust division filed a civil antitrust lawsuit to block the proposed deal, and also proposed the settlement. DoJ said the divestiture will preserve the competition for radio advertising in the two radio markets.
Under the terms of the proposed settlement, Cumulus would have to divest two stations in Harrisburg-Lebanon-Carlisle and one station in Flint to buyers approved by the DoJ. The divestitures are expected to reduce the combined company's share in advertising revenues in the two markets to less than 40 percent.
The DoJ noted that the proposed deal would have eliminated the competition in the two markets, thus increasing prices and reducing levels of service in the sale of radio advertising time. Cumulus and Citadel radio stations compete head-to-head against each other in the two markets and when they combine there would be no competition.
Las Vegas, Nevada-based broadcast holding company Citadel, the third-largest radio station owner in the country, owns and operates 225 radio stations and also operates the radio network Citadel Media business. The company, with around 4,000 employees, had filed for bankruptcy in 2009, and is now owned by its lenders, the Dallas hedge fund R2 Investments, JPMorgan Chase and private equity investment firm TPG.
Atlanta-based Cumulus, the second-largest radio broadcaster in the U.S. based on station count, anticipates that the combination would result in owning 572 radio stations across about 120 U.S. markets. Synergies of at least $50 million are estimated from the deal, with a capitalized value of about $1.50 to $2.00 per share.
CMLS closed Thursday's regular trading session at $2.58, up $0.01 or 0.39 percent on a volume of 0.26 million shares, and CDELB.PK closed at $32.00, up $0.10 or 0.31 percent on a volume of 0.11 million shares.
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